Retail and consumers

Holiday rental curbs won’t stop complaints about Airbnb

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Lockboxes are ugly but useful contraptions that avoid the hassle of exchanging keys in person. Their proliferation in beauty spots such as Edinburgh, Devon and Paris has fuelled suspicions that too many properties in tourist areas are rented out through holiday letting websites such as Airbnb, angering local tenants who struggle to find reasonably priced properties.

To combat this, England is introducing new regulations for holiday lets. These rules won’t provide a quick solution to shortages of affordable homes to rent.

New short-term lets that are not used as the owner’s sole or main home will in future require planning permission. Owners of holiday rental properties will also have to join a mandatory register to help local authorities understand what proportion of local housing is rented out to tourists.

Line chart of Per cent change over 12 months showing UK private housing tenants have struggled with soaring rents

Given Britain’s chronic housing shortage, holiday lets are an obvious target even if they are not the sole cause. Other countries and cities have already taken action. New York began in September enforcing a de facto ban on short-term rentals. Barcelona was an early mover against sites such as Airbnb. Scotland has introduced a licensing system.

But there are several aspects of the English rules that should work in the favour of companies such as Airbnb. First, only owners of new dedicated holiday lets will need to apply for planning permission once the rules are introduced, which is expected this summer. Existing short-term rentals will be reclassified automatically. Perversely, property owners may be dissuaded in future from converting their properties back to long-term lets if they have to apply for another change of use, warns the campaign group Generation Rent.

Second, homeowners will also still be able to rent out their main house or flat for up to 90 nights a year without approval. 

Airbnb says a typical UK host makes £5,500 a year. Clearly, that sum will be higher in popular tourist areas, where more properties are run as full-time holiday lets. Regulation is light. Campaigners representing private tenants want local authorities to cap holiday rentals in problem areas, such as where conversions to short-term lets or second homes almost outpace the supply of new houses.

But evidence from New York suggests that even with more stringent rules, any improvements in the availability of long-term residential rental properties will be slow. Total rental inventory in Manhattan continued to fall in the fourth quarter, according to StreetEasy data.

Tighter regulation of holiday lets is a global theme. Airbnb is examining new business lines as revenue growth slows following a post-pandemic boom. If other countries follow the English example, letting sites and holiday landlords have very little to fear.

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